Amazon Kindle May Beat iPad in Short Term, but Future Unclear

 
 
By Nicholas Kolakowski  |  Posted 2010-01-31 Email Print this article Print
 
 
 
 
 
 
 

Amazon.com CEO Jeff Bezos says millions of Kindle mobile devices have been sold, placing the online retailer in a strong position in the e-reader market. However, the release of Apple's iPad tablet PC has the potential to put long-term competitive pressure on the Kindle and its other rivals. Amazon.com seems to be preparing for that eventuality by releasing an SDK for developers to use to create applications for the Kindle, but Apple is also planning an apps ecosystem for the iPad.

Amazon.com is unlikely to see the momentum for its popular Kindle e-reader checked in the short term by the release of the Apple iPad. However, recent moves on Amazon.com's part suggest that the company sees the iPad and other tablet PCs as something of a competitive threat, while some analysts suggest that Apple's device could have a long-term negative impact on Kindle sales.

For the moment, the Kindle continues to be a strong seller, with Amazon.com CEO Jeff Bezos asserting that "millions" of the devices have been sold. Analysts have estimated that exact number to be anywhere between 2.25 million and 3 million, although the company itself has traditionally declined to break out exact numbers.

"We now estimate that Amazon has shipped a total of 2.25 [million] Kindle units and generated total hardware [revenue] of $742 [million] ([including] $500 [million] in [deferred revenue]) in the past 27 months versus our prior estimates of 1.1 [million] and $370 [million] respectively," Sandeep Aggarwal, an analyst with Collins Stewart, wrote in a Jan. 29 research note.

TechCrunch's Michael Arrington, meanwhile, quoted "sources close to Amazon" as presenting that figure of 3 million units.

Despite having been dismissed as more of a niche device by some analysts earlier in the year, e-readers managed to become one of the hot items of the 2009 holiday season, with both Amazon.com and Barnes & Noble claiming strong sales for their respective devices. During the Consumer Electronics Show in Las Vegas, a number of smaller companies rolled out e-readers evidently designed to claim at least a tiny percentage of that burgeoning market.

However, many of the tablet PCs also making their debut at CES included some sort of e-reader functionality, in addition to offering other features such as color screens and a full operating system.

Then, on Jan. 27, Apple formally introduced its own tablet PC during a high-profile event in San Francisco. Dubbed the iPad, the tablet with the 9.7-inch LED backlit multitouch screen will run some 140,000 applications from the App Store upon launch, according to Apple, and run on a 1GHz Apple A4 proprietary processor.

"Apple finally unveiled its much-anticipated multimedia tablet iPad, along with an e-reader app called iBooks and an online e-books store," Youssef Squali, an analyst with Jefferies & Co., wrote in a Jan. 28 research note. "We believe that the iPad will slow Kindle's growth momentum but we do not see its impact on Amazon's [2010] revenues as material. There is likely a market for a dedicated e-reader but arguably at lower prices."

In essence, Squali asserted, the iPad could negatively affect Amazon.com's Kindle-related revenue to the tune of roughly 1 percent in 2010, and potentially more in 2011. "The scenario assumes further [international] expansion of Kindle and a price reduction from $199 to $256, but assumes no incremental Amazon e-book sales on iPad."

Currently, Amazon.com markets a Kindle App for iPhone and iPod Touch that allows e-books to be downloaded from the online retailer's e-bookstore. Squali suggested it was likely that the iPad will support a Kindle App, potentially expanding Amazon.com's market via the device and "generating revenues that could offset lost [revenue] from [Kindle] device sales." At the same time, though, the presence of Apple's upcoming iBooks storefront could eat into Amazon.com's e-book revenue.



 
 
 
 
Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.
 
 
 
 
 
 
 

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